SZSE Index Jumps Higher After PBOC Announcement
Asian stocks inched higher on Monday as U.S. Treasury yields regained stability after a plunge last week.
Over in mainland China, shares bolstered on gains during the day. The SZSE Component index added 2.96% to 9,328.97, while the SSE Composite index jumped 2.1% to 2,883.10.
Additionally, the Shenzhen exchange composite trod to 1,571.97, higher by 3.048%.
Hong Kong’s Hang Seng index advanced 2.4% subsequent to life insurance company AIA’s stock surge of 3.22%.
Shares of Cathay Pacific, Hong Kong’s flag carrier airline, surged 1.32% following CEO Rupert Hogg’s resignation last Friday.
Hogg decided to step down as the company’s head “in view of recent events.”
Cathay Pacific has come under political pressure from Beijing. All after the discovery that two of the airline’s pilots were involved in the anti-extradition protests in Hong Kong.
SZSE’s bullish stance followed the People’s Bank of China’s (PBOC) announcement on Saturday to improve the mechanism utilized in establishing loan prime rate (LPR) from this month.
This will allow the central bank of China to “use market-based reform methods to help lower real lending rates.”
Beijing tries to prevent a further slowing of the economy, mainly disheveled by the ongoing trade war with Washington.
PBOC Reforms Rates to Support A Slowing Economy
The People’s Bank of China (PBOC) unveiled a primary interest rate reform to direct borrowing costs to lower levels for companies. It also intends to support its economy, which still suffers massive damage from the Sino-U.S. trade war.
According to the central bank of China, it will enhance a system used to establish the LPR to further decrease real interest rates for companies.
The move came after the release of weaker-than-expected growth data in July and preceded a cabinet announcement on Friday.
It also came first before the bounce-back in the Shenzhen Exchange, as manifested by stronger SZSE stocks.
Analysts commented that it underlines the obvious government attempts to implement reforms in bolstering a slumping economy.
According to the central bank in a statement published on its website, “by reforming and improving the formation mechanism of LPR,” it will manage to use market-based methods of reform to support lower “real lending rates.”
The PBOC added that it would also further explore “market-based” reform on interest rates to “improve the efficiency of interest rate transmission.” It also said that it would improve on decreasing financing costs of the real economy.
